 Backs Key Alaska Provisions in Letter to House/Senate Conferees July 23, 2002
"The Alaska Natural Gas Pipeline Act of 2002 complements Alaska's efforts to foster the competitive and responsible development of natural resources in our state," Knowles said. "The Alaska natural gas pipeline is an energy project of national importance. In addition to supplying increased demand for natural gas in the United States, the pipeline will create tens of thousands of new jobs in the U.S. and Canada and will foster the manufacture of pipeline steel and other products." In a comprehensive four-page letter being sent this week to 61 members of the House and Senate, Knowles highlighted two key elements of the legislation as especially important: pipeline route and commodity risk. The legislation favors the Alaska Highway route for the pipeline, the same route that was designated in the Alaska Natural Gas Transportation Act of 1976, acknowledged by President Carter in 1977, and supported in international agreements with Canada. "The 'southern route,' as it is called, follows the right-of-way of the Trans-Alaska Pipeline System and the Alaska Highway and is proven to be environmentally and economically sound," Knowles said. "It has clear advantages over a route that crosses under the often ice-choked Beaufort Sea. This 'over the top' route faces enormous environmental and regulatory obstacles and strong opposition from North Slope Eskimos because of its potential risk to subsistence whaling in the Beaufort Sea." Both the House and Senate bills prohibit the northern route, and the state strongly supports this approach. Knowles also supports the tax credit provision to reduce the risk of investment in a natural gas pipeline, which will likely operate for more than 50 years and cost in excess of $20 billion. "Buffers against commodity price swings and other incentives are accepted approaches to mitigating the high risk associated with vital projects like the Alaska gas pipeline," Knowles said. "The credit is available only if gas prices fall below a government-set floor and if prices rise above a ceiling, the credit is repaid. With this provision, risk is neutralized during periods of low natural gas prices, and investment in this valuable pipeline is made all the more feasible, thereby eliminating the single greatest impediment to private financing." Knowles dismissed Canadian criticism of the tax credit provision. "Various types of incentives to encourage investment are a fixture in the Canadian oil patch, the American industry, and throughout the world's petroleum sector," Knowles said. "More importantly, these claims fail to recognize that commodity price stabilization is highly beneficial to all those on the North American pipeline grid, both Americans and Canadians. Construction of the pipeline will yield stable, low natural gas prices for consumers." Much of the criticism rests on the assumption that lower gas prices resulting from the construction of the Alaska gas pipeline will make a separate Canadian pipeline from the Mackenzie Delta uneconomic. Alaska believes there is no conflict between the two projects, and both are needed to meet the growing demand for clean-burning natural gas. In fact, much of the gas transported through a Mackenzie Valley pipeline would likely be used for developing huge oil sands deposits in Alberta. In recognition of this, the governments of the Yukon Territory and Alberta have expressed strong support for an Alaska Highway gas pipeline and separate Mackenzie Delta pipeline. Knowles also told lawmakers that the State of Alaska will join federal efforts to provide financial incentives and other assistance to facilitate pipeline construction. "The State views this project as an important component of our own economic development," Knowles said. "I have proposed the use of tax-exempt Alaska Railroad bonds to finance the construction of the pipeline, and I support a number of other means at the State's disposal to advance this project. However, North Slope gas producers have told us that the most important element in their decision to build a pipeline is the enactment of appropriate federal legislation." Knowles' letter is intended to counter White House opposition to the commodity risk and route provisions in the national energy bill. He also reiterates his strong support for the provision to allow responsible development of petroleum resources in the Arctic National Wildlife Refuge (ANWR) as an essential component of a balanced national energy policy that also includes conservation, alternative fuels, and fuel efficiency. "The coastal plain of ANWR is the most promising unexplored oil province in North America, with the potential for an elephant field on a par with Prudhoe Bay," Knowles said. "Its development is the surest way to increase domestic energy production. A secure source of domestic petroleum would be a boon to the American economy, as would the jobs that development of a small portion of ANWR would create. "All
of this can be accomplished with minimal negative impact on Alaska's
environment," the Governor added. "The footprint left
by oil development has decreased dramatically since oil production
began on Alaska's North Slope, more than 30 years ago. Thanks
to modern drilling techniques, oil facilities in ANWR would only
affect one-tenth of one percent of the total refuge area. That
area is comparable to locating an airport the size of Dulles
International in the South Carolina-sized refuge."
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